Chinese drywall manufacturer reaches settlement

中国尊严08

http://www.nola.com/business/index.ssf/2011/12/chinese_drywall_manufacturer_r.html#comments

Chinese drywall manufacturer reaches settlementPublished: Thursday, December 15, 2011, 3:16 PM     Updated: Friday, December 16, 2011, 5:02 PM By Rebecca Mowbray, The Times-Picayune The Times-Picayune


Knauf Plasterboard Tianjin, a major manufacturer of problem drywall from China, has agreed to pay hundreds of millions of dollars to repair 4,500 mostly Gulf Coast area homes ruined with its product. The settlement, announced Thursday by U.S. District Judge Eldon Fallon, ends a nightmare for about 1,575 Louisiana families which began when many rebuilt their homes after Hurricane Katrina or purchased new ones with corrosive wallboard, prolonging the agony of the storm.
Chris Granger, The Times-Picayune archiveA sample of the Chinese-made drywall ripped out of the Chalmette home of Thomas and Lauren Stone in June 2009. The Stones are in the long process of replacing it all by themselves

With their properties unfit for residence or sale, many have lost their homes to foreclosure or been devastated financially as they were forced to rent apartments while continuing to make their mortgage payments.
The deal is likely worth $800 million to $1 billion based on the number of homes, average size and repair cost, plaintiff liaison counsel Russ Herman said. That means that some $280 million to $350 million could flow to Louisiana, which is believed to have about 35 percent of all homes with Knauf-brand drywall.

About 14,000 people nationwide live or lived in properties with Knauf-brand drywall, Herman said.
Knauf attorney and defendants liaison counsel Kerry Miller said the amount of the settlement ultimately depends on how many homeowners can prove that they have drywall produced by their client.

The settlement will pay the full cost of repairing homes and sets aside money to cover other economic losses, foreclosures and short sales. Although money has also been set aside to cover health problems, Knauf attorney Steven Glickstein said that from Knauf's point of view, there is no evidence that problem drywall is responsible for personal injuries.

The deal resolves the major piece of the Chinese-Manufactured Drywall Products Liability Litigation that began two and a half years ago with Saints coach Sean Payton filing suit, but owners of homes, apartments and commercial buildings built with Knauf drywall probably won't begin to see money until this summer. The Knauf deal builds upon previously announced settlements with Interior/Exterior Building Supply LP of New Orleans and Banner Supply Co. of Florida, but settlements with home builders and installers who contributed to the debacle and their insurers still need to be added to pots of money. The Knauf settlement requires those other negotiations to be completed before money is distributed.

"We think it's a great day for property owners. We think it's a good day for manufacturers," Glickstein said. "We look forward to the day when all the homes are fixed."

Left in the lurch

While Knauf Plasterboard, a Chinese manufacturer affiliated with the German company Knauf Gips, was the most well-known defendant in the case, more than two dozen other mostly foreign manufacturers remain. Foreign manufacturers that don't otherwise have a presence in the United States aren't bound by the jurisdiction of U.S. courts, and most have ducked the litigation, leaving many homeowners with non-Knauf drywall without recourse.
For that reason, Fallon said, people in Virginia with problem drywall won't benefit from this settlement, because most of their wallboard was manufactured by Taishan Gypsum Co. Ltd., one of the companies that has ignored the proceedings.

"The remaining cases...involve defective drywall from other Chinese manufacturers, including Taishan and BNBM (Beijing New Building Materials PLC). The entire focus of the litigation now will focus on this aspect of the case," said Fallon, who will travel to Hong Kong for a week next month to oversee depositions, because previous rounds were useless.

Miller urged homeowners with other brands of drywall to remain hopeful, because if Knauf settled, others will too. "Sights shouldn't be lost that this is a Chinese company. That is the settling company, and it has decided to step up and do the right thing," Miller said.

Lead plaintiff counsel Arnold Levin said his group plans to start seizing ships owned by Chinese conglomerates and auctioning them to fill judgments rendered against them.
Relief is on the way

Details of the Knauf settlement will be filed in court Tuesday, and Fallon will consider a motion for preliminary approval Jan. 4. Money won't become available until 30 days after a "fairness" hearing and Fallon declares the settlement reasonable, which will likely be next summer.

The Knauf deal will create an unlimited "remediation fund" available to any property owner with Knauf brand drywall who filed suit in federal or state court on or before Dec. 9. Initially, the remediation fund will be capitalized with $200 million, but every time the balance dips to $25 million, the fund will be replenished with $50 million until all homes are repaired.

Homeowners can choose to have Moss & Associates, a Florida contractor that Knauf hired last year to run a pilot program for drywall repairs, or a contractor of their own choice, handle repairs. They can also choose to receive a discounted cash payment.

All homes will be fully repaired, no matter how big or how fancy, attorneys said.

Herman noted that Moss & Associates has said that it can repair 200 homes a month. Even at such an impressive pace, if Moss were to tackle all of the eligible homes, it would take at least a year and a half to get it all done. Property owners might want to consider for themselves how realistic such an ambitious target seems, he said.

The settlement will also create an "other loss fund" to reimburse people for documented economic losses, foreclosures and short sales and handle any claims for health problems. The other loss fund will be created with a fixed $30 million contribution from Knauf. It will grow as additional settlements are reached with other parties, but the fund will be capped at the total amount collected.

Attorneys fees and costs will be handled separately with a $160 million fund, so it won't impede people's ability to rebuild. While that may sound like a lot of money, Herman said it won't cover all attorney fees and the costs that went into pressing the case and inspecting homes.

Keeping up the fight

Remediation will cover all problem drywall, and in most cases, all drywall in homes, as well as electrical wiring, smoke alarms, fire alarms and other safety systems. Built-in appliances such as refrigerators and microwaves will also be replaced. Homeowners will also receive stipends to cover damaged personal appliances such as computers and flat-screen televisions, and money to cover moving and storage.

The plaintiffs committee will appoint two ombudsman to shepherd claimants through the process and answer questions. Fallon will handle any appeals arising from the settlement process.

So far, people who have been chosen for Knauf's repair pilot program have considered themselves lucky, but with the settlement, people with work under way or who have signed papers to begin have to stick with Moss as the contractor and can't take the cash payment option. Work is under way at 77 homes, and another 90 households have signed work orders.

The bad drywall problems came about after the hyperactive 2004 and 2005 hurricane seasons, when the efforts to repair homes on the Gulf Coast coupled with the overheated construction market exhausted supplies of domestic drywall. The nation began importing supplies, but much of what came in emitted a noxious sulfur smell and corroded metal in homes and destroyed home electronics. The drywall also elicits frequent complaints of respiratory and skin ailments.

Underscoring the breadth of interest in the problem, an aide to Florida Sen. Bill Nelson and Alabama Attorney General Luther Strange were in the audience Thursday, while two state court judges from Florida listened to the proceedings by telephone. All 500 slots in the conference call were filled, and many drywall victims complained they were unable to dial in.

The U.S. Consumer Product Safety Commission has received complaints about bad drywall from about 3,905 residents in 42 states, the District of Columbia, American Samoa, and Puerto Rico, but the CPSC believes that as many as 6,300 homes have been affected. Louisiana has the second-highest number of complaints, behind Florida. More than 10,000 claims have been made in the litigation in New Orleans.

Herman said that work to help people with other brands of drywall continues. "They're the innocent victims of corporate malfeasance," he said. "To them, we pledge, keep the faith. Our journey does not end here. We pledge to make you whole."